According to the recent readings by UK finance, “the total number of mortgages in arrears halts at 79,620.”
Within this total, there were 26,850 early mortgages in early arrears, slashed down 2% on the previous quarter. This figure slowly increased throughout 2020.
Rising living costs and increasing insurance contributions amid inflation push the budget up.
As the court clears the backlog, home repossessions may increase.
Repossessions are the last resort and are a thorough court-based process. Authorities examine the borrower’s circumstances.
In the fourth quarter of 2021, 30,010 homeowners’ mortgages had massive arrears of 10% or more.
Many customers were in deep arrears in the year 2020 and amid the pandemic. Thus, many individuals might have leveraged pandemic-related support and schemes; for clearing the backlog.
Repossessions were banned by the government previously during the pandemic. There is this urgency to clear the backlog by the year-end. This initiative may result in increased repossessions in the year 2022 in the UK.
Primary Reasons for Relatively Low Repossessions
- Here are the primary reasons homeowners delayed possessions until 2022:
- Mortgage lenders offered homeowners great relief by ensuring flexibility of postponing payments up to 6 months.
- The government-released funds £94.6 million in 2022 for consumer debt advice. It also issued funds in the year 2020-21 for the same.
- Coronavirus job retention schemes helped mitigate the job loss and personal grievances to an extent.
What Does This Major Decision Mean for Homeowners?
Inflation in the UK means rising mortgage interest rates.
Individuals having mortgages rushed to secure and lock the house at the lowest interest rate. According to data, “28% of home loans in Q4 were re-mortgages”.
The Bank of England recently increased the base rate from 0.1% to 0.25%. It will affect the borrowing capacity of individuals.”
How will individuals manage rising interest rates on a mortgage, given the rising cost of living and squeezed budgets? Be it a 5k loan on bad credit with no guarantor or mortgages, and borrowings will become costlier.
Here is what the decision means for mortgage holders:
Re-mortgaging at unexpectedly high-interest rates
Individuals considering re-mortgaging might find high-interest rates.
The cost of houses will increase in the UK by 2022-24. It means one needs to shell out more money to buy the property, especially in the age of high mortgage rates.
Squeezing budgets amid furlough
Rising costs of living and increased mortgages are becoming an intense topic of consideration. The government launched multiple schemes to support citizens in the direst hour of furlough and unemployment, and the support ended in 2022.
High-interest rates = high mortgage arrears
High-interest rates might push mortgages into arrears in 2022.
An unaffordable mortgage with high-interest rates has made homeownership just a dream for many.
The situation may go haywire for those who staked mortgage as collateral to take a 5k loan bad on credit and no guarantor. According to the current situation in the UK, many such individuals are living hand to mouth.
Debunked government support
No more government support means no more flexibility on repayments, no more deferrals, and possession hearings may start soon. Things take worse turns.
Non-stop warning mails
Repossession threat fires continuous warnings to pay off the mortgage. Securing the property has become increasingly difficult for borrowers, and it is resulting in an increased burden on homeowners with other liabilities.
How Can Mortgage Loan Holders Avoid Repossession?
A lender sells off the property if the borrower cannot make the repayments.
The lender may conduct a property auction to sell it off.
It might be an additional burden on the repossession.
You may have to pay off the mortgage fee for 3 months. You may consider a bridge loan in this situation. If you are short of a sum, you can take a bridge loan for the same.
Here are some ways to avoid home repossession:
Discuss the situation with your lender
Try to stop repossession by discussing it with your lender. Discuss whether they could increase the repayment term.
If the lender is already filing for court repossession, ask whether he could change the mortgage type or reduce the repayments.
You can schedule an affordable mortgage plan. Consider having everything written. It will help with jurisdiction interference.
Pay off some arrears on the mortgage
How many pending payments are you left to make?
How much of these can you afford to pay now?
In case of a mortgage in arrears, contact your lender and inform him about the financial situation.
Tell him you cannot make payments anymore. It is better than keeping the lender in a confused state.
If you could pay an amount, pay it as soon as possible. Paying even a small amount can help restore the creditor’s faith in you.
Put a halt to 5k loans bad on credit and no guarantor repayments. Use the money here.
· Check for government benefits
If you’ve been injured in an accident or lost a job owing to natural interference, you could be eligible for many government grants.
For example, if you have become disabled owing to an accident or cannot work anymore on-site, you can ask for government help.
If you qualify for any benefit or grants issued by the government, keep your lender posted about it. Lenders do not claim repossession if you can show them repayment proof.
· Rent your home
If you can live anywhere but in your home, you can rent it. It is the best thing to do when dealing with debts and mortgages in arrears.
The income from the rent could help you cover some repayments. Remember, renting a home in arrears is a risky deal. Do so only if you have the required documents in place. If you still wish to take the route dearly, take financial advice accordingly.
6 Things a lender must do Before issuing a repossession in the court
Before a mortgage lender repossesses the home, he must ensure:
- Confirm the total amount you owe
- Consider your request to change the mortgage loan terms
- Respond immediately to any payment made by you
- Grant reasonable time for you to consider any proposal they suggest
- Reason to turn down the agreement, proposal, or payment
- Acquaint you with the repossession laws, court trial dates, and times in advance
The current situation in the UK is not promising regarding mortgages. The rising interest rates and the court’s initiative to clear the mortgage backlog can be life-threatening. Take the measures to stop home repossession. It is vital to act early lest you miss the opportunity.
Emma Anderson is a highly accomplished Editor-in-Chief at 24cashfinances, renowned for her exceptional expertise in the finance industry. Holding degrees in Finance and Marketing, Emma has developed a deep understanding of the financial landscape, particularly when it comes to loans and personal finance.
Emma’s professional journey began as a financial analyst, where she gained hands-on experience in evaluating market trends and analysing investment opportunities. Emma’s enthusiasm for writing and her goal to educate and give individuals a voice motivated her to move into financial journalism. Her work has been published in popular magazines and she has produced thought-provoking pieces on various financial topics.